Lebanon seeks $2bn in eurobonds after record drop in borrowing costs

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A cashier counting a bundle of Lebanese pound at the Central Bank of Lebanon. Photo - Executive-Magazine.com

Lebanese Finance Minister Mohammad Safadi announced plans to raise $2 billion in eurobonds this year after borrowing costs of the most indebted Arab country registered a record drop.

“We are now talking to the financial markets to get their advice on when is the best time for the sale of benchmark-size bonds,” Safadi said in an interview with Bloomberg on Thursday while adding that the government intends to exchange existing debt valued at $3bn with new eurobonds in the coming year.

“The ministry hasn’t appointed advisers to manage the planned sale,” he said. Benchmark-size typically means a sale of at least $500 million.

The Mediterranean Arab nation raised $600m in 5% dollar bonds by tapping international bond investors in March. Safadi said the government plans to use the proceeds of the $2bn sale for infrastructure investments in electricity and gas sector.

According to data compiled by Bloomberg, the yield on the 6.6% dollar bonds rose one basis point, or 0.01% point, on Thursday to 6.29%, six basis above the low on 23 March. The risk premium investors demand to hold Lebanese debt instead of US Treasuries rose five basis points this year to 389, lower than similarly rated countries such as Egypt, Senegal and Ghana, JPMorgan Chase & Co data show.

Lebanon is rated B1 at Moody’s Investors Service, four levels below investment grade. Standard & Poor’s rates the country one level lower.

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